In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil. The increased supply allows the economy to produce more goods, which benefits some people, if not all of them. Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

The Economist’s debate talks about industrial policy and export promotion in the abstract, rather than the NEI per se, but I recommend checking it out. Scott Sumner and Laurence Kotlikoff make especially good sense.

The Mexican government announced yesterday that it will expand the list of U.S. products subject to punitive import duties in retaliation for a brazen, 15-year-long refusal of the United States to honor its NAFTA commitment to allow Mexican long-haul trucks to compete in the U.S. market. Given continued U.S. intransigence on the issue, Mexico’s decision is understandable, if not laudable.

The dispute is not very complicated. Under the terms of the deal, Mexican trucks were to have been able to compete in U.S. border states by 1995, and throughout the United States by 2000. But President Clinton, at the behest of the Teamsters union, suspended implementation of the trucking provision on the grounds that Mexican trucks weren’t safe enough for U.S. highways.

By 1998, the Mexicans had had enough, and brought a formal complaint under the NAFTA dispute settlement system, and in 2001, prevailed with a unanimous panel decision that found the United States in violation of the agreement, and ruled that Mexican trucks meeting U.S. safety standards had to be given access to the U.S. market.

In response to the NAFTA decision, Congress stipulated 22 safety requirements that Mexican trucks had to satisfy in order to gain access to the U.S. market. But before the U.S. Department of Transportation could grant any permits to Mexican truckers, in 2002, environmental and labor groups filed a lawsuit to block implementation on the grounds that the regulations violated U.S. environmental law.

In 2004, the U.S. Supreme Court unanimously struck down the truck ban, and soon after a government pilot program was developed to allow a limited number of Mexican trucks to serve the U.S. market. But funding for the pilot program was cut off by a Teamsters-friendly Congress in 2008, which effectively put the U.S. market off limits to Mexican trucks once again—and the United States squarely in violation of its NAFTA obligations, again.

In August 2009, after it became apparent that the administration and Congress preferred the economic cost of the trucking ban to the political cost of crossing the Teamsters, the Mexican government tried to change the equation by imposing $2.4 billion in retaliatory duties on about 90 U.S. products. A Mexican trucking association also filed a $6-billion lawsuit against the U.S. government.

But with no discernible progress toward resolution over the past year, the Mexican government announced yesterday that it will expand the list of U.S. products subject to punitive, retaliatory duties in an effort to convince Congress and the administration to finally live up to America’s word.

The Mexican government is right to retaliate—and to expand the list of products subject to punitive duties. Of course, retaliation hurts innocents, like U.S. businesses and workers, and Mexican businesses and consumers, who have nothing to do with the central dispute. And it increases the amount of red tape and the role of governments in international trade. But retaliation—when authorized by agreement and properly targeted—can also be an effective tool in promoting trade liberalization, reducing red tape, and diminishing the impositions of government.

It is by changing the political calculus that retaliation can be effective. Thus far, U.S. politicians have found the economic costs of the Mexican trucking ban and the retaliation to be tolerable (for themselves)—at least relative to the expected political costs from doing the right thing by ending the ban. By expanding the list to include other products, like oranges, the Mexicans hope to impress upon other U.S. interests, like the citrus industry in a very important swing state, that they have dogs in this fight as well.

Between the rising costs on the economic side of the equation and the diminishing political benefits on the other, support among politicians for the truck ban should dissipate.

The Obama administration’s failure to connect the dots is surprising. Its fealty to the Teamsters directly undermines the lofty goals of its National Export Initiative—which seeks to double U.S. exports in five years. On trade policy, the administration appears yet to fully grasp that the hip bone’s connected to the thigh bone, the thigh bone’s connected to the knee bone, the knee bone’s connected to the ankle bone, etc. When you restrict imports (in the immediate case, imports of Mexican trucking services), you restrict exports.

The rising economic and political costs of the truck ban suggest that something’s going to have to give soon. By amplifying the stakes, the Mexicans are right to hasten that day.

In his State of the Union address this year, President Obama announced a goal of doubling U.S. exports in five years. The “National Export Initiative” has since become the centerpiece of his administration’s trade policy, complete with its own Executive Order, organizational structure, and dedicated website.

Although I would be happy to see exports double in five years, I am skeptical of efforts to enshrine that goal as a national imperative. I worry that Five Year Plans and the setting of export targets puts the United States on the slippery slope to industrial policy, which is being touted nowadays with growing vim and vigor by columnists, politicians and other analysts who wish the United States were more like China.

But the economic straight jacket of industrial policy is not an imminent outcome of the NEI. And some of the reforms under consideration are sensible. For example, efforts to clarify, simplify, and streamline U.S. export control procedures are likely to reduce regulatory obstacles and spur meaningful export growth without imposing new burdens or diverting resources from elsewhere in the economy. Likewise, the administration’s discovery of the virtues of passing the long-pending bilateral trade agreements with South Korea, Colombia, and Panama could lead to the reduction or elimination of artificial barriers to U.S. exports in a variety of economic sectors.

But while we might rejoice in export-led economic growth, the National Export Initiative suffers from myopia, as it institutionalizes public misperceptions about how trade bestows its benefits on consumers and businesses. Just take a look at the program’s eight focus priorities:

(a) Exports by Small and Medium-Sized Enterprises (SMEs). Members of the Export Promotion Cabinet shall develop programs, in consultation with the TPCC, designed to enhance export assistance to SMEs, including programs that improve information and other technical assistance to first-time exporters and assist current exporters in identifying new export opportunities in international markets.
(b) Federal Export Assistance. Members of the Export Promotion Cabinet, in consultation with the TPCC, shall promote Federal resources currently available to assist exports by U.S. companies.
(c) Trade Missions. The Secretary of Commerce, in consultation with the TPCC and, to the extent possible, with State and local government officials and the private sector, shall ensure that U.S. Government-led trade missions effectively promote exports by U.S. companies.
(d) Commercial Advocacy. Members of the Export Promotion Cabinet, in consultation with other departments and agencies and in coordination with the Advocacy Center at the Department of Commerce, shall take steps to ensure that the Federal Government’s commercial advocacy effectively promotes exports by U.S. companies.
(e) Increasing Export Credit. The President of the Export-Import Bank, in consultation with other members of the Export Promotion Cabinet, shall take steps to increase the availability of credit to SMEs.
(f) Macroeconomic Rebalancing. The Secretary of the Treasury, in consultation with other members of the Export Promotion Cabinet, shall promote balanced and strong growth in the global economy through the G20 Financial Ministers’ process or other appropriate mechanisms.
(g) Reducing Barriers to Trade. The United States Trade Representative, in consultation with other members of the Export Promotion Cabinet, shall take steps to improve market access overseas for our manufacturers, farmers, and service providers by actively opening new markets, reducing significant trade barriers, and robustly enforcing our trade agreements.
(h) Export Promotion of Services. Members of the Export Promotion Cabinet shall develop a framework for promoting services trade, including the necessary policy and export promotion tools.

Beside the amorphous, bureaucratese task descriptions — and the fact that several of the eight priorities seem to be redundant (really, what are the substantive differences between priorities (b), (c), (d), and (h)?) — the NEI systemically neglects a broad swath of opportunities to facilitate exports because it only contemplates the export-oriented activities of exporters. It’s as if the administration believes that U.S. exporters are born exporters and never experience life as producers or as consumers of input. It’s as if they incur no costs until their goods reach foreign ports — after which they face a gauntlet of taxes, regulations, and other barriers abroad.

The NEI enshrines the fallacy that it is exclusively foreign-borne obstacles that inhibit U.S. export potential, when it should be obvious that U.S. policies also undermine U.S. competitiveness. Before U.S. companies are exporters, they are producers. And as producers of goods, they are consumers of capital equipment, industrial components, other raw materials, energy, capital and labor. And as consumers of all of those inputs, our producers face a host of U.S. taxes, tariffs, regulations, mandates, and other U.S. government-imposed impediments that reduce their competitiveness at home, and as exporters. If the administration wants to get serious about doubling U.S. exports by 2015, everything should be on the table. The scope of potential reforms should be broadened to include policies that affect the pre-export activities of U.S. exporters.

U.S. producers account for over half of the value of U.S. imports, which means there is great potential to increase their competitiveness by improving their access to imports. It also explains the strong correlation between imports and exports, between imports and GDP, and between imports and job growth — facts that too many politicians wish to expunge from the record. But during the depths of the recent recession, both the Mexican and Canadian governments moved decisively to cut tariffs across the board on industrial inputs and capital equipment in an effort to make their producers more competitive.

The Obama administration, as part of the NEI, should press Congress to take a similar initiative to increase U.S. competitiveness by eliminating tariffs on all industrial inputs — not just those “non-controversial” tariff items in the Manufacturing Enhancement Act (also known as the Miscellaneous Tariff Bill) that just passed both chambers of Congress — for the purpose of making U.S. manufacturers more competitive.

Furthermore, the NEI should include a strong effort to compel Congress to change the U.S. antidumping and countervailing duty laws to require the International Trade Commission to consider the impact of trade restrictions on downstream U.S. industries. Under the current statutes, the ITC is forbidden from considering such impact even though most of the approximately 300 existing U.S. antidumping and countervailing duty orders restrict imports of upstream raw materials and other industrial inputs required by downstream U.S. industries. That statutory bias clearly undermines U.S. export competitiveness, particularly since downstream, consuming industries are much more likely to export than are firms in those industries that seek relief under the trade remedies laws.

If the administration were serious about making trade policy work—rather than just paying it lip service—it would compile its own exhaustive list of laws, regulations, policies, and practices that actually undermine its stated objectives of facilitating economic growth, investment, and job creation through expanded trade opportunities. Then, it would make the changes necessary to ensure that our policies are paddling in the same direction. But that is not happening—at least as far as I can see.

At the beginning of the year, President Obama announced his goal of doubling U.S. exports in five years. He even formalized the goal by granting it an official name—the National Export Initiative. Well, I see no imminent harm in setting the ambitious goal of reaching $3 billion in exports by 2015 (although I am wary of the tactics under consideration and the evocation of Soviet Five-Year Plans). But it betrays a lack of true commitment to that goal when nothing is being done to reduce the competitive burdens imposed on U.S. exporters by our own myopic, anachronistic trade remedies regime. The president exhorts U.S. exporters to win a global race, yet he overlooks the fact that Congress has tied many of their shoes together.

The costs of the U.S. Antidumping and Countervailing Duty laws on U.S. exporters are manifest in various forms, but this post concerns the burdens imposed on U.S. producer/exporters who rely on the raw materials and other industrial inputs that are subject to AD and CVD measures. Indeed, most of the products subject to the 300 U.S. AD and CVD orders currently in effect (like steel and chemicals) are, in fact, inputs to downstream U.S. producers, many of whom compete (or try to compete) in foreign markets. (Just take a look at this list and decide for yourself whether these are products that you’d buy at the store or if they are inputs a U.S. producer would use to produce something else that you might buy at a store.)

AD and CVD duties squeeze these U.S. producer/exporters’ profits, first by raising their input costs and then by depriving them of revenues lost to foreign competitors, who, by producing outside of the United States, have access to that crucial input at lower world-market prices, and can themselves price more competitively. This is not hypothetical. It is a routine hindrance for U.S. exporters. And one that has eluded the president’s attention, despite his soaring rhetoric about the economic importance of U.S. exports.

Consider the case of Spartan Light Metal Products, a small Midwestern producer of aluminum and magnesium engine parts (and other mechanical parts), which presented its story to Obama administration officials, who were dispatched across the country earlier this year to get input from manufacturers about the problems they confronted in export markets.

Beginning in the early-1990s, Spartan shifted its emphasis from aluminum to magnesium die-cast production because magnesium is much lighter and more durable than aluminum, and Spartan’s biggest customers, including Ford, GM, Honda, Mazda, and Toyota were looking to reduce the weight of their vehicles to improve fuel efficiency. Among other products, Spartan produced magnesium intake manifolds for Honda V-6 engines; transmission end and pump covers for GM engines; and oil pans for all of Toyota’s V-8 truck and SUV engines.

But then all of a sudden, in February 2004, an antidumping petition against imports of magnesium from China and Russia was filed by the U.S. industry, which comprised just one producer, U.S. Magnesium Corp. of Utah with about 370 employees. Prices of magnesium alloy rose from slightly more than $1 per pound in February 2004 to about $1.50 per pound one year later, when the U.S. International Trade Commission issued its final determination in the antidumping investigation. By mid-2008, with a dramatic reduction of Chinese and Russian magnesium in the U.S. market, the U.S. price rose to $3.25 per pound (before dropping in 2009 on account of the economic recession).

By January 2010, the U.S. price was $2.30 per pound, while the average price for Spartan’s NAFTA competitors was $1.54. Meanwhile, European magnesium die-casters were paying $1.49 per pound and Chinese competitors were paying $1.36 per pound. According to Spartan’s presentation to Obama administration officials, magnesium accounts for about 40-60% of the total product cost in its industry. Thus, the price differential caused by the antidumping order bestowed a cost advantage of 19 percent on Chinese competitors, 17 percent on European competitors, and 16 percent on NAFTA competitors.

As sure as water runs downhill, several of Spartan’s U.S. competitors went out of business due to their inability to secure magnesium at competitive prices. According to the North American Die Casting Association, the downstream industry lost more than 1,675 manufacturing jobs–more than five-times the number of jobs that even exist in the entire magnesium producing industry!

Spartan’s outlook is bleak, unless it can access magnesium at world market prices. Its customers have turned to imported magnesium die cast parts or have outsourced their own production to locations where they have access to competitively-priced magnesium parts, or they’ve switched to heavier cast materials, sacrificing ergonomics and fuel efficiency in the face of rapidly-approaching, federally-mandated 35.5 mile per gallon fuel efficiency standards.

And to add insult to injury, the Obama administration recently launched a WTO case against China for its restraints on exports of raw materials, including magnesium. Allegedly, since January 2008, the Chinese government has been imposing a 10 percent tax on magnesium exports. How dissonant, how incongruous, how absolutely imbecilic it is that, in the face of China’s own restraints on its exports (which the U.S. government officially opposes), the U.S. antidumping order against imported magnesium from China persists! How stupid. How short-sighted.

Spartan’s is not an isolated incident. Routinely, the U.S. antidumping law is more punitive toward U.S. manufacturers than it is to the presumed foreign targets. Routinely, U.S. producers of upstream products respond to their customers’ needs for better pricing, not by becoming more efficient or cooperative, but by working to cripple their access to foreign supplies. More and more frequently, that is how and why the antidumping law is used in the United States. Increasingly, it is a weapon used by American producers against their customers—other American producers, many of whom are exporters.

If President Obama really wants to see exports double, he must implore Congress to change the antidumping law to explicitly give standing to downstream industries so that their interests can be considered in trade remedies cases. He must implore Congress to include a public interest provision requiring the U.S. International Trade Commission to assess the costs of any duties on downstream industries and on the broader economy before imposing any such duties.

The imperative of U.S. export growth demands some degree of sanity be restored to our business-crippling trade remedies regime.

This echoes identical anxieties while the world went through a far more dramatic Asian currency crisis after July 1997, and a Russian debt crisis the following May.

The most widely ignored effect of that crisis, however, was to depress foreign demand for oil, and thus slash oil prices to U.S. buyers from $25 a barrel in early 1997 to $11 by the end of 1998.

Oil is a major input into the manufacturing process (e.g., chemicals and plastics), and a major cost of distribution (trucks, trains and airplanes). It is also a major determinant of the cost of all energy sources used in making other goods such as aluminum and paper. When marginal costs go down, it becomes profitable to expand production.

At the height of the Asian/Russian crises, the table below shows that U.S. manufacturing output rose by more than 10 percent. It’s an ill wind that doesn’t blow somebody some good.

During the last big foreign currency/debt crisis, the real growth of U.S. Gross Domestic Purchases (the home-grown portion of GDP) jumped by 4.7% in 1997 and 5.5% in 1998. Yet the Fed cut interest rates three times in October and November of 1998 because of what was happening in other countries.

The table show what happened to the price of oil and to U.S. manufacturing from June 1997 to December 1998. The middle column is the price of a barrel of West Texas crude, and the column to the right is the U.S. industrial production index for the manufacturing sector.

President Obama has committed his administration to the ambitious goal of doubling U.S. exports in the next five years. I don’t believe the government should be setting such targets—the rate of growth of U.S. exports should be left to the marketplace—but I am all for the administration seeking ways to expand the freedom of U.S. companies to sell in global markets.

In the “Economic Watch” column of the Washington Times today, I suggest six policy changes that will help American producers sell more of their goods and services abroad. None of them involve subsidies, threats of sanctions, or other government involvement.

Among my suggestions: enact into law the three free-trade agreements that have already been negotiated, repeal the trade embargo against Cuba, keep trade peace with China, and set a good example by keeping the U.S. market open.

If I could have added another suggestion (alas, space in a real newspaper is limited), it would be to issue more visas for trade delegations visiting the United States. Under misguided notions of national security, we make it more difficult than it should be for delegations from China and other markets to visit the United States to inspect U.S. goods offered for sale. But like the other suggestions, this one is politically challenging as well.

If the president wants to boost exports, he will need to show the necessary leadership to remove the government-imposed barriers that still remain.

The U.S.-China Business Council has performed a valuable public service by marshalling state-by-state figures on exports to China. In its annual survey, released this morning, the USCBC documents that 19 states exported $1 billion or more in 2009 to China, which is now the third largest market for U.S. exports.

In a statement accompanying the report, the USCBC noted that exports to China declined only slightly in 2009, compared to a 20 percent plunge in exports to the rest of the world. Top U.S. exports to China last year were computers and electronics, agricultural products, chemicals, and transportation equipment.

The USCBC figures tend to undercut complaints that China’s currency policies have stymied U.S. exports to that country. In fact, as I argued in an op-ed in the Los Angeles Timeslast week, since 2005, U.S. exports to China have been growing three times faster than our exports to the rest of the world.

There is agreement across the spectrum that the Chinese government should continue to move toward a more flexible, market-priced currency. But the export numbers do not give any support to the critics who want to threaten sanctions against China. In fact, as I concluded in my op-ed:

If the Obama administration hopes to double U.S. exports in the next five years, as the president announced in his State of the Union address, it should praise China for its growing appetite for U.S. goods and services, not threaten it with trade sanctions. Any company hoping to double its sales in the next five years would be foolish to pick a needless fight with one of its best customers.